Friday, August 11, 2017

Pay for Success: Opportunities and Challenges in Housing and Economic Development

by David Luberoff
Senior Associate
Director
Pay for Success (PFS) initiatives have received widespread attention in the United States over the past several years. These outcomes-based projects – which generally do not pay service providers and government entities until and unless they achieve certain agreed upon outcomes – hold great promise in a variety of fields, including housing and community development, notes Omar Carrillo Tinajero in a new working paper jointly published by NeighborWorks® America and the Joint Center for Housing Studies. In the paper, Carrillo, a 2016 Edward M. Gramlich Fellow, notes that PFS projects may offer important opportunities to break down funding silos, devise innovative new ways to address pressing problems, and compel providers to focus on the results of an intervention. However, he adds, “because their complexity makes them at present difficult to structure and finance, PFS projects are likely to be useful only in limited circumstances, which means the PFS model should therefore be used judiciously and carefully.” Moreover, he notes, “the interest in and discussion about PFS projects has highlighted approaches that could be carried out by the public sector without the structure of PFS arrangements.”

To better understand how this approach could be used to address housing and community development issues, Carrillo examines three projects: 
  • The Denver Supportive Housing Social Impact Bond Initiative, which focused on providing supportive housing for individuals who are both frequently in jail and often go to emergency medical services in Denver.
  • The Chronic Homelessness PFS Initiative, which aims to provide 500 units of permanent supportive housing for up to 800 of the 1,600 people currently experiencing homelessness in Massachusetts.
  • Project Welcome Home, an initiative in Santa Clara County, California focused on providing housing and supportive services for 150-200 chronically homeless individuals in the Silicon Valley over six years.
In the paper, Carrillo reviews the goals of each initiative and describes the metrics that will be used to decide whether and how much providers will be paid.  He also offers detailed descriptions about how each initiative was organized, funded, and evaluated.

The initiatives, he writes, “are promising, especially as they promote an emphasis on outcomes and begin to streamline services from various government sources.” However, he also cautions that “it is not immediately obvious that their benefits outweigh their costs,” particularly the extensive time and resources needed to develop and oversee the initiatives. He adds that it may be possible for the public-sector to adopt many PFS approaches (particularly their focus on outcomes, and the need for better data systems to measure those outcomes) without developing the complex structures and systems needed to establish and oversee an effective PFS.

“Though PFS sounds promising,” he concludes, “putting a project together can entail logistical difficulties and substantial transaction costs. Because of these challenges, the PFS model should be used judiciously. In particular, it could be a promising strategy for situations in which addressing problems requires coordination of a variety of disparate sources of public funding which, for various reasons, are difficult to use in a coordinated fashion.”

However, he adds, “we should not lose sight of the overall problem that PFS programs address: the need to provide services to as many people as possible, in the most effective way possible. It seems difficult to conceive of increased funding for these much-needed resources from the federal government, and state and local governments will continue to find themselves pressed for solutions to deliver evidence-based services. The PFS movement has pushed public-sector entities to focus more heavily on outcomes and, in doing so, to consider more multi-pronged approaches for addressing key issues.”


Monday, August 7, 2017

Significant Improvements in Energy Efficiency Characteristics of the US Housing Stock

by Elizabeth
La Jeunesse

Research Analyst
Compared to 2009, single-family homes built before 1980 are now better insulated, have relatively newer heating equipment, and are more likely to have undergone an energy audit. These and other energy-related characteristics of the owner-occupied stock, shown in Table 1, are consistent with the expanding size of the home improvement industry over the past few years, with particular growth in energy-sensitive projects. Homeowners' annual spending for related projects—including roofing, siding, windows/doors, insulation and HVAC—expanded from $50 billion to nearly $70 billion over 2009-2015.



The transformation of the existing US housing stock toward greater energy efficiency also reflects a wave of energy-related incentives for HVAC and building envelope upgrades put in place following the rise of energy prices in the mid-2000s. At the federal level, one of the biggest initiatives was the Obama administration’s American Recovery and Reinvestment Act of 2009, which extended and strengthened tax credits for energy improvements to existing homes, including insulation, windows, roofs, water heaters, furnaces, boilers, heat pumps, and central air conditioners.

Despite recent progress, there is room for growth. As of 2015, 17 percent of single-family homes built prior to 1980 were still reported to have ‘poor insulation’, and only 11 percent had received an energy audit. By comparison, a recent profile of newly constructed homes (built after 2009) showed only 1 percent of residents reporting ‘poor insulation’—an impressively low share. Moreover, nearly 90 percent of new homes come with double- or triple-pane windows. Bringing older homes up to this higher standard will require significant investments to the existing stock.
At the same time, only 5 percent of new homes have smart thermostats—a relatively inexpensive but potentially high-payoff upgrade—and a similar share have energy-saving tankless water heaters. These lower shares suggest room for growth in energy-efficient technologies in new and old homes alike.
Renewable technologies, particularly solar energy, are also showing signs of growth. As of 2015, nearly 6 percent of recently built homes reported on-site solar generation, a relatively small share, but nearly triple the incidence in older homes. Thanks to the Consolidated Appropriations Act of 2016, US taxpayers can still claim a credit of up to 30 percent of expenditures for photovoltaic and solar thermal technologies placed in service in their homes. Several US states also now provide consumers with credits for net excess energy generation, further increasing the payoff for installing renewable energy systems.
With recent declines in energy prices, however, there is some question of whether homeowners still have strong incentives to pursue energy-efficiency improvements. Since 2015, the consumer price index for energy has hovered around 10 percent below its average for the prior ten years (2005-2014). If this trend continues, further progress in energy-related improvements will probably depend even more on consumer preferences and finances, in addition to changing building and product codes, and evolving industry standards. 
Data used in this analysis comes from a newly released 2015 Energy Information Administration survey that tracks the energy-related characteristics of all US residential units. Further results detailing energy consumption intensity (or usage per square foot) will be released in 2018, enabling deeper analysis into the evolution of energy efficiency in US homes.

Monday, July 31, 2017

Why is Moving to a New Home Worse for African-American and Hispanic Children than for White Children?

by Kristin Perkins
Postdoctoral Fellow
Compared to children who do not move to a new home, children who move are more likely to do worse in school, have more physical and mental health problems, and are more likely to be delinquent and use alcohol and drugs. In recent research that uses detailed data from the Project on Human Development in Chicago Neighborhoods, I find that African-American and Hispanic children showed more signs of anxiety and depression after they moved. I also find that, on average, Hispanic children demonstrated more aggressive behavior after they moved (Figure 1). White children in this sample, however, did not appear to be negatively affected by a move.
Figure 1.  



Why might moving be worse for African-American and Hispanic children than it is for white children? Perhaps non-white children are more likely to be exposed to violence or have fewer social supports in their homes and neighborhoods, which would make them more susceptible to the disruptive effects of a move? Neither of those factors, however, explained the negative effect of moving for African-American and Hispanic children (as measured by the Child Behavior Checklist, well-established scales that are frequently used as indicators of child behavior). A variety of other factors, such as being renters instead of homeowners and, for Hispanic children, their immigration history, also failed to explain the differences.

Another factor could be the differences between the types of neighborhoods that people are leaving and those they are entering. In general, most of the children in my sample whose families left their neighborhoods moved to a new neighborhood with similar characteristics. This is consistent with other research showing that it is uncommon for families to move to new neighborhoods that are radically different (in terms of poverty level and other characteristics) from the neighborhoods they are leaving. Given this, it's not surprising that among those moving to similar (or worse) neighborhoods, African-American and Hispanic children showed more signs of anxiety and depression, on average, after they moved.

I do, however, have suggestive findings that indicate that African-American children who moved to much better neighborhoods, within or beyond the city of Chicago, did not experience increases in anxiety and depression, unlike African-American children who moved to similar or worse neighborhoods. This finding is consistent with research on the Moving to Opportunity program showing better outcomes in some domains for children who moved from neighborhoods characterized by concentrated poverty to lower poverty neighborhoods.

These and similar findings from other studies of residential mobility and neighborhood effects have several possible implications for policymakers. The data suggest that the children most likely to experience negative effects of moves seem to be similar to children that Matthew Desmond's work on evictions shows are more likely to experience forced moves. If this is the case, the findings underscore the importance of efforts to prevent and reduce evictions and other forced moves.

The findings also suggest that policymakers pursuing programs that aim to improve neighborhood contexts by relocating families need to acknowledge the potential disruptive effects of residential mobility that could undermine the benefits of those moves. If further research confirm the suggestive results showing that the disruptive effects of residential mobility may differ depending on the characteristics of the destination neighborhood, then mobility programs should be designed to focus on efforts to move families to more advantaged neighborhoods.

Beyond mobility programs, policymakers might consider the extent to which other programs and policies unintentionally increase the number of moves that children make and thus increase the possibility of negative outcomes. As one example, it would be useful to determine if the Housing Choice Voucher Program's time limits for finding a unit to rent with a voucher unnecessarily result in temporary moves before a household finds a permanent unit.

Taken as a whole, such measures could potentially reduce negative outcomes among African-American and Hispanic children whose families have to move, particularly those who have to move frequently.

Monday, July 24, 2017

We're Finally Building More Small Homes, but Construction Remains at Historically Low Levels

by Alexander Hermann
Research Assistant
Census data released last month show that after years of stagnation, construction of smaller homes grew appreciably in 2016. New completions for homes under 1,800 square feet increased nearly 20 percent in 2016 to 163,000 units, the first significant growth since 2004 and the largest rise since the data series began in 1999.

This growth is significant because many first-time and lower-income homebuyers hope to purchase smaller homes, which are generally less expensive than larger ones. Moreover, historically-low levels of home construction over the last decade have led to declining inventories, decreasing vacancy rates, and increasing prices, as discussed in our latest State of the Nation's Housing report (Figure 1).


Even with the uptick in 2016, though, small-home construction remains 65 percent below the 464,000 units completed annually between 1999 and 2006, and comprises a much smaller share of newly-built housing than in the past. In 2016, small homes were 22 percent of single-family completions, well below their 37 percent market-share in 1999. In contrast, the share of large homes built grew from 17 percent in 1999 to 30 percent in 2016, while moderately-sized homes, which have consistently been the largest share of the market, have annually been 43-to-48 percent of all new single-family homes.

Construction of condos and townhouses, possible alternatives to smaller single-family housing, also remains low. Builders of multifamily properties continue to focus on the rental market where demand remains strong. Consequently, only 28,000 condos were started in 2016, a modest increase from the 26,000 starts in 2015 but much lower than the 53,000 starts averaged annually in the 1990s (Figure 2). Similarly, townhouse starts grew from 86,000 units in 2015 to 98,000 units in 2016. While this is more than double the number of starts from 2009 and comparable to the 95,000 units started annually in the 1990s, it is less than half the number started in 2005.



The low levels of new construction have resulted in historically-low housing inventories, especially entry-level housing. According to data from CoreLogic, the supply of modestly-priced homes – those selling for 75-to-100 percent of the area's median list price – was below three months at the end of 2016, about half of the six months that generally represents a balanced market (Figure 3). Indeed, according to data compiled by Zillow, only a quarter of the homes for sale at the end of last year were in the bottom one-third of area homes by price, while half were in the top one-third.



Increased demand for entry-level housing and the corresponding uptick in smaller housing construction have already contributed to the growing number of first-time homebuyers in 2016. According to the National Association of Realtors, first-time homebuyers comprised 35 percent of home sales in 2016, up from 32 percent in 2015 but still below long-term historical rates, which are close to 40 percent of all buyers. Looking forward, increases in the supply of smaller homes, townhouses, and possibly condos could help address the growing demand for lower priced homes for first-time and low-income homebuyers.

Thursday, July 20, 2017

Steady Gains in Remodeling Activity Moving into 2018

by Abbe Will
Research Associate
Healthy and stable growth in home improvement and repair spending is anticipated for the remainder of the year and into the first half of 2018, according to our latest Leading Indicator of Remodeling Activity (LIRA), released today. The LIRA projects that annual increases in remodeling expenditures will soften somewhat moving forward, but still remain at or above 6.0 percent through the second quarter of 2018.

The remodeling market continues to benefit from a stronger housing market and, in particular, solid gains in house prices, which are encouraging owners to make larger investments in their homes. Yet, weak gains in home sales activity due to tight inventories in many parts of the country is constraining opportunities for more robust remodeling growth given that significant investments often occur around the time of a sale.

Even with some easing this year, the remodeling market is still expected to grow above its long-term averageOver the coming 12 months, national spending on improvements and repairs to the owner-occupied housing stock is projected to reach fully $324 billion.


For more information about the LIRA, including how it is calculated, visit the JCHS website.